Marshall v. Covington
Decision Date | 15 May 1959 |
Docket Number | No. 8775,8775 |
Citation | 81 Idaho 199,339 P.2d 504 |
Parties | Joseph W. MARSHALL, Ellwood T. Rees, David A. McClusky, George W. Warner, and Royal S. Cutler, Plaintiffs-Respondents, v. Fen COVINGTON, Defendant-Appellant. |
Court | Idaho Supreme Court |
Benoit & Benoit, Twin Falls, for appellant.
Stephan, Stephan & Heap, Twin Falls, for respondents.
June 10, 1955, defendant (appellant) entered into a contract with the plaintiffs (respondents) copartners doing business at Twin Falls under the firm name and style of Twin Falls Clinic. All of the parties are doctors of medicine. At the time of the agreement defendant was 41 years of age, had graduated from medical school in 1939; had had hospital experience; five years in the armed services medical corps; had engaged in general practice and had had one year of postgraduate schooling in obstetrics and gynecology; and at the time of the agreement was practicing in his specialty at Salt Lake City, Utah.
Some of the members of the partnership had been practicing their profession in Twin Falls for eleven years. The partnership had been in existence for approximately six years.
By the terms of the contract the plaintiffs agreed to employ defendant for a period of three years to perform professional services in the Twin Falls Clinic in the specialty of obstetrics and gynecology. The agreed salary was $750 per month for the first year, $833.33 for the second year, and $916.66 for the third year, plus $50 per month for the time served after defendant shall have obtained certification by the American Board of Obstetrics and Gynecology.
At the end of the three-year period 'by mutual consent of the parties' defendant was to be given the opportunity of becoming associated with the plaintiffs as a partner. Paragraph 8 of the agreement provides:
'It is further agreed that party of the second part, upon separation from the Twin Falls Clinic for any reason whatsoever, shall not practice medicine or surgery within a radius of twenty-five (25) miles from Twin Falls, Idaho, for a period of three (3) years immediately following such separation.'
Paragraph 11 in part provides:
Defendant rendered services at the clinic under the agreement from June 10, 1955, to June 10, 1958. Defendant terminated the relationship voluntarily after giving the sixty days' notice as provided by the contract. He then commenced the practice of medicine and surgery within the proscribed area and now carries on such practice and will continue to do so unless restrained.
During the existence of the partnership its members rendered service to patients in Twin Falls and surrounding territory with a radius in excess of 100 miles. About 26,000 patients had registered for treatment or service at the clinic. Slightly less than 50% of the patients resided in Twin Falls, and the remainder in the territory outside Twin Falls.
During the period of the contract relationship, defendant performed his services at the clinic in a satisfactory manner. A substantial portion of plaintiffs' obstetrical any gynecological practice was turned over to defendant. He was introduced to, met, treated, and advised many of plaintiffs' patients, and in so doing obtained their confidence and good will. During the time of his service defendant obtained certification by the American Board of Obstetrics and Gynecology, based upon case histories and reports developed from his experience and practice at the clinic.
Plaintiffs fully performed their part of the agreement.
Other pertinent facts as found by the court are:
request for transfer of records to the defendant continue.
'In Twin Falls there is one other doctor besides the defendant who is 'Board Certified' in the same specialty as the defendant. There is also one other doctor who limits his practice entirely to obstetrics and gynecology and he is well qualified in obstetrics and gynecology. Within the 25-mile radius of Twin Falls there are 50 to 60 medical doctors of which 35 to 40 handle obstetrical and gynecological cases.
'When a doctor is 'Board Certified' he must confine his practice to the certified specialty, except in emergencies or expose himself to disciplinary proceedings.
'That the terms and provisions of said Contract of Employment are fair, reasonable and just and are not unconscionable in any respect.
'That the said acts of defendant are in violation of said Contract of Employment and are a continuing injury to and interference with the plaintiff's professional practice and constitute great and irreparable damage and prejudice to the plaintiffs and such can not be fully compensated in damages.'
The district court entered judgment enjoining the defendant from practicing medicine and surgery within a 25-mile radius of Twin Falls for a period of three years from June 10, 1958. Defendant brought this appeal from the judgment.
Defendant contends the restrictive covenant is unenforceable because it is unreasonable, inequitable and oppressive, and that it is against public policy.
He first urges a distinction should be drawn between restrictive covenants ancillary to the sale of a business or property, and such covenants when contained in a contract of employment. From the authority cited--Annotation 45 A.L.R.2d 96, 97, 98--it appears the courts which recognize a distinction, do so upon two grounds: First, the purchaser of a business may be entitled to protection against mere competition by his vendor, whereas an employer may not be so protected against his employee. Second, the freedom of an employee to pursue a lawful calling and thus to support himself and family is entitled to greater weight in equity than the freedom of a vendor to reengage in business. Basic to both propositions is the fact that in the sale of a business the vendor has usually transferred to the purchaser, for a consideration, the good will of his business. Whereas, the relationship of employer and employee does not contemplate a transfer of good will. These considerations find expression in a more strict construction of the restrictive covenants and the reasonableness of the limitations imposed, rather than in a hardfast rule denying enforcement to such covenants in an employment contract.
The problems involved in the application of restrictive covenants ancillary to contracts of employment, as to both duration and territorial extent, and the decisions of the courts thereon, are ably and exhaustively discussed and annotated in 41 A.L.R.2d 15 and 43 A.L.R.2d 94. See also earlier annotations, 9 A.L.R. 1456, 20 A.L.R. 861, and 52 A.L.R. 1362, and generally as to contracts involving physicians, surgeons, dentists and others engaged in healing professions, 58 A.L.R. 156. From these numerous decisions the general rule emerges that such covenants will be enforced when they are reasonable, as applied to the covenantor, the covenantee, and the general public; they are not against public policy, and any detriment to the public interest in the possible loss of the services of the covenantor is more than offset by the public benefit arising out of the preservation of the freedom of contract.
Annotation-- Restriction on Practice of Physician, 58 A.L.R. 156, at page 162.
In the recent case of Bauer v. Sawyer, 1955, 6 Ill.App.2d 178, 126 N.E.2d 844, the appellate court of Illinois considered a partnership agreement, executed by twelve doctors, in which it was agreed that a withdrawing partner would not practice within 25 miles of Kankakee, where the partnership business was located, for a period of five years. There were 70 doctors within the restricted area and approximately 90,000 population. After reviewing Illinois decisions and decisions from other states, the court said:
'The provision in this agreement, therefore, preventing the defendant withdrawing partner from practicing within a radius of 25 miles of Kankakee for 5 years from the date of withdrawal being limited as to area and being limited as to time, being not greater than reasonably necessary to protect the fair and legitimate contract rights and interests of the remaining partners, is reasonable and not contrary to public policy, is supported by a sufficient legal consideration, and, a breach having occurred, it is a negative restrictive covenant which may properly be enforced in equity by injunction.' 126 N.E.2d at page 851.
In that case, as here, the defendant also urged that the restriction was violative of public policy and against the public interest in that it would deprive the people of Kankakee and vicinity of the needed services of the defendant. To this the court said the evidence would not support the conclusion that the 70 doctors present in the area were incapable of...
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